As franchise consultants, something that we are often asked by both entrepreneurs who want to franchise and future franchisees are the advantages and disadvantages they can find in the franchise system. The franchise formula is a key model for success in a wide range of businesses worldwide. This is because franchisors and franchisees win through mutual collaboration. But it also has its drawbacks.
Something that characterizes the franchise system is its ability to generate synergies and benefits for the parties that operate: franchisor and franchisee. And this is because the franchise goes much further than other management models in terms of the advantages it offers, not only to the franchiser, but also to its associates. These are the most outstanding ones for both parties:
Advantages for the franchiser
The franchise allows the franchisor to grow faster. Both numerically and geographically. This is due to the fact that by franchising a company shares efforts and investments with its franchisees.
The franchise provides the franchiser with greater negotiating power with its suppliers, which gives him better purchasing conditions.
The creation of a network of franchises enables the franchiser to have a channel through which to sell its products or services.
The franchise enables the franchisor to generate a powerful brand image. This is one of the key elements of any brand.
Advantages for the franchisee
The franchise allows the franchisee to start a company with the help of the franchiser. The franchisee already has proven experience and know-how. With this, the initial risk that exists when starting up any activity is considerably reduced.
The franchisee benefits from initial and continuous training throughout the development of the business, in order to be successful in its management.
The franchisee takes advantage of economies of scale, such as advertising campaigns common to the entire network.
The franchisee obtains the supply of products, without having to worry about the logistics or looking for suppliers, which are supplied by the head office.
In many cases the franchisee has financial support. All thanks to collaboration agreements signed between the ensign and certain banking entities. The aim is to offer advantageous conditions when it comes to making payments to the head office.
The franchisee has a territorial exclusivity stipulated in the contract. This makes it easier for them to operate in a specific area with the confidence that no other establishment of the same brand will be installed there.
The franchisee can take advantage of the synergies of belonging to a chain with a recognized brand image among the consumer public. Even on a national or international scale.
The franchisee can benefit from the study of new products or services, new systems… by the head office. The headquarters experiments them in its own establishments to check their acceptance on the market. Always before putting them into practice in the franchised premises.
Disadvantages of the franchise
Although the advantages are obvious, franchising is not a panacea. There are also some disadvantages that any future franchiser must take into account. Among the most obvious, these stand out:
Being a franchisee means assuming certain limitations. You will not be able to give free rein completely to your entrepreneurial character. It is the franchiser who makes the decisions, under the protection of his experience and proven know-how.
In the franchise, individual effort does not prevail, it is a network. Therefore, everything that happens in it has positive or negative repercussions.
And in this sense, one of the keys to not making mistakes is to choose the right franchis